Blockchain and Digital Tokens

Blockchain and digital tokens deliberately waste storage, which is cheap, to create something new that is valuable: virtual continuity. Continuity is a universal property of the physical world. If I pass an object behind my back, we can be reasonably sure that what reappears in my left hand is what disappeared from my right.

Continuity permits identity of both things and people; it permits property because a continuously identified thing can be owned by a continuously identifiable person. It therefore permits transactions—transfers of property. It permits trust. Continuity is not sufficient for property and contracts (you also need law), but it is necessary.

And the blockchain guarantees inheritance: the digital token used to perform transactions in the later transaction Y is the only “child” of transaction X. The coin cannot be spent twice – the double-spend problem has been solved. This virtual continuity enables

digital identity

ownership

transactions, and

trust, and

contracts and markets,

among parties with no prior relationship and without intermediaries.

Virtual continuity leads to one final symmetry. Recent technology waves—notably the Internet of Things, the proliferation of smart mobile devices, and augmented reality—directly endow physical objects with information and intelligence: they make the real virtual. The technologies of token and blockchain, conversely, endow data with continuity: they make the virtual real. When the real and the virtual converge, it is as if our world and our map of the world become the same thing.

This article by Philip Evans outlines how the economics of transaction costs and trust could be reshaped by tokens and blockchains and by the stacked architecture on which they are built.